BBPP1103Principles of Management

4. Organisation DesignLO:1. Explain the concept of organisational

structure2. Identify the four factors that influence

organisational structure3. Compare the different types of

organisational structure4. Describe the concept of authority in

organisations5. Differentiate between the concepts of

centralisation and decentralisation6. Evaluate the different types of work design7. Discuss the emerging organisational designs

4.0 IntroductionOS refers to organisation’s functions that are grouped and coordinated formally.

A system that connects the duties, workflow and communication channels between individuals and the various work groups

to simplify the use of each resource and individual collectively as a management system

usually displayed in graphical form = organisational chart

Typically in a pyramid chart

4.1 Factors that influence OS

Organisational Strategy Size of Organisation

Technology Environment

OS supports and facilitate the overall organisational strategies to achieve the objectives.When strategies change, structure tend to change too.

Small = lesser work specialisation, less standardisation and more centralisation of decision making.Large = specialisation, standardisation and decentralised decision makingSize measure = sales /manpower

Technology is subject to routine and non-routine activities. Routine = departmentalisation structures (centralised), work specialisation and complying to rulesNon-routine = depends on expertise, thus more decentralised, less specialisation and don not need to comply to strict rules

external influences = environmental influencesSome face static, some face dynamic environmentDynamic = more uncertainties, thus best to reduce threatsHence, OS may be altered according to the uncertanties in its environment.

4.2 Designing OSDepartmentalisation

based on the types of departmentalisation = division of work and employees to different organisational units. Common types:

4.2.1 Functional Departmentalisationcoordinates work and employees through different units and each unit is responsible for a specific business function or expertise area.

Advantages : Allows work to be carried out by individuals who are qualified and skilled in the areas concerned, It reduces cost by reducing work duplication and use of resources Each individual in the same department will acquire the same work experiences or training, communication and coordination, thereby reducing problems for management

Disadvantages: Difficulty in coordinating between departmentsCan cause delays in decision making Produce managers and employees who are restricted in experience and expertise

4.2.2 Product Departmentalisationbased on products and employees work in different units, each with the responsibility of producing a product or service. For example,

Advantages : Allows managers and employees to expand their experience and expertise that are related to the overall activity of the product or service produced.Allows management to evaluate the work performance of each work unit

Disadvantages: Managers may focus on their product to the exclusion of the rest of the organisation.Administration costs may also increase due to each product having its own functional-area experts

4.2.3 Customer Departmentalisationcoordinates work and employees in different units that are responsible for specific types of consumers only. For example,

Advantages : The organisation focuses all its efforts on fulfilling the needs of consumers.Allows the organisation to specialise and adapt its products and services to fulfil the requirements and resolve consumers’ problems.

Disadvantages: The existence of duplication of work and use of resources.Difficulty to coordinate between departments that provide services to different types of consumers.Can cause employees to overemphasise effort to fulfil customer needs until it affects the organisation’s business performance.

4.2.4 Geographic Departmentalisationcoordinates the work and employees of different units that are responsible for conducting business activities in certain geographical locations. For example,

Advantages : The abilities of the organisation to react with speed and efficiency to the requirements of specific markets especially in different countries.It helps to reduce costs by positioning the organisational resources nearer to the targeted consumers.

Disadvantages: It creates duplication of work and the use of the organisation’s resources.Difficulties will arise in coordinating between departments as the departments are in geographical areas that are located far from each other.

4.2.5 Matrix DepartmentalisationCombines two or more types of departmentalisation at the same time. The employees report to two different supervisors or managers. It leads to cross interactive functions that cannot be done in the other types of departmentalisation.

Advantages : It allows the organisation to manage efficiently the projects or activities that are large scale and complex.

Disadvantages: It requires a higher level of coordination to manage the complexity involved.Tend to focus on the conflict of authority.Can cause confusion among employees who have to report to more than one supervisor or manager.Requires higher-level management skills

4.3 Authority

Chain of Command

The right to give directives, take actions and make decisions related to activities to achieve the organisation’s objectives.Normally channelled from top to bottom.The right exists based on the formal position in an organisation

Line & Staff Authority

Line & Staff Function

Span of Control

4.3.1 Chain of CommandExplains who reports to whom. Individuals in the top rectangles have authority over those in the lower rectangles, according to the lines that connect them. Individuals at the lower levels must report all aspects of their work to the people at the level above them.

To avoid confusion and conflict of authority, unity of command is needed in an organisation, i.e. the management principle that states that employees only report to one manager at a time

4.3.2 Line & Staff AuthorityThe line authority and staff authority must work together to maintain the efficiency and effectiveness

4.3.3 Line & Staff FunctionsLine Function = an activity that directly contributes to the production and selling. E.g., the activities that are conducted by the production and marketing departments.

Staff Function = an activity that contributes indirectly to the production and selling. E.g., The activities that are conducted by the accounts, human resources and legal departments

4.3.4 Span of ControlRefers to the number of employees who report directly to a manager or supervisorVertical = Restricted span of control. allows the organisation to increase its efforts to monitor its employees. stringent supervision. BUT, will incur higher costs especially employees’ salaries because it requires multiple levels of management. AND, an cause delays in decision making and the staff/managers have the tendency to refer their problems to upper management. Creativity among employees will be limited.

Currently most organisations practise a broad span of control as it reduces costs, expedites the decision-making process, increases creativity and flexibility, narrows the gap towards consumers and imparts power to employees

4.4 Centralisation - DecentralisationCentralisation is a situation where almost all control is

centralised, especially the control for decision making to one party, which is the top level people in an organisation.

Give authority to the managers to make decisions even though it is a trivial matter.

Decentralisation is a situation where a certain amount of authority is handed down to subordinates or employees at the

lower levels of an organisation.

have more delegated authority at all levels.

4.4 Centralisation - Decentralisation

CentralisationSize – small organisation means top managers may not face many difficulties in monitoring the whole organisation.Standardised/work specialisation – does not require creativity.

DecentralisationSize – large organisations will gain more advantages by practising decentralisation. Large means increase in responsibilities, thus managers at lower levels should be delegated with more authority to deal with increased duties.Place – when products/services are located at different places.Creativity – when employees or managers of lower levels need to be more creative in resolving particular issues.

4.5 Work design

Work Specialisation.The act of assigning the contents of smaller sections from the overall work or process to individuals. It is economical, quicker, cheaper wages, productivity problem minimal. BUT, employees be easily bored, thus low job satisfaction and high absenteeism.

Job RotationTransferring employees from one type of specialisation to another periodically. Hence, employees may have various skills. It can reduce boredom in employees and give more job satisfaction

WD specifies the activities that are done by employees. It determines how and where the work has to be done. It ensures a healthy and safe working environment in achieving productivity and efficiency.

4.5 Work design

Job EnlargementIt adds the number of tasks in an activity. It gives employees the opportunities to develop other skills. BUT, it potentially causes stress among them due to many tasks.

Job EnrichmentIt results in an increase in the number of tasks in the activities and gives the employees authority and control in making decisions related to their work. Frederick Herzberg stated that as employees only handle a few tasks, they are quickly bored. It makes work activities more interesting and challenging and when employee responsibilities increase, then the motivation and interest will also increase.

4.6 Organisation Process DesignMechanistic Organisation

an organisation categorised by work specialisation and responsibility, fixed roles and chain of command that are rigid caused by centralised control and vertical communication.It focuses on organisational structure.

Organic Organisationan organisation categorised with a wide definition of work and responsibilities, changing roles and decentralisation, and horizontal communication.It focuses more on the organisation processes.

4.6.1 Emerging DesignTeam Structure

Disintegration of departments and the decentralisation of decision making to the level of work teams.Allows the organisation to achieve efficient standardisation that is practised by bureaucracy.Encourage flexibility that comes with the team structure.

Modular OrganisationIt outsources business activities to other organisations, suppliers, experts or consultants. business activities can be bought from other organisations for the purpose of adding activities and can be dropped when they are no longer required.Can be cheap and able to focus on its own tasks.

4.6.1 Emerging DesignVirtual Organisation

An organisation that has become a part of the business network. Virtual organisations exist is in a network that shares expertise, costs, capabilities, markets and customers collectively to resolve customers’ problems or producing certain products and services.It allows organisations that are involved in the network to share all costs involved

Borderless OrganisationAn organisation that tries to eradicate the chain of command and to replace departmentalisation with team authority. This means the organisation is trying to eradicate borders whether vertically or horizontally in an organisation.Able to utilise its knowledge, expertise and capabilities of employees in a better way.

5. Human Resource Management

LO:1. Describe human resource management2. Clarify the needs of human resources3. Identify the methods for capturing the

interests of qualified candidates4. Explain the methods for developing qualified

employees5. Identify methods for maintaining qualified

employees in the organisation

5.0 Introduction

HRM = a process of obtaining, developing and maintaining a sufficient number of

qualified employees in order to achieve goals that have been set

5.1 Needs of Human Resources

5.1 Needs of Human Resources

Planning:• consider the mission, strategies and objectives• human resource planning is interdependent• Poor planning will result: Surplus in workforce and/or shortage

Job Analysis Forecasting

5.1.1 Job Analysis

A detailed process regarding the related tasks of a particular job and the quality of human resources needed to perform the job

Four types of Information:1. Job activities2. Tools and equipment used3. The context of job (situation, workplace environment or

scheduling)4. The needs of personnel in performing the job, meaning the

knowledge, skills and capabilities required for the particular job

5.1.1 Job Analysis

Job Descriptiona written statement that clearly explains the job, duties, responsibilities, activities and performance results required from the job holder

Job specificationa written statement stating the qualifications required from the job holder

5.1.2 Forecastinga process of predicting the total number and types of employees with the knowledge, skills and abilities needed by an organisation in the future

Internal ForecastingInternal factors of the organisation which influence the level of demand and supply of human resources in the organisation.e.g. financial performance, productivity level, mission and change in technology

External Forecastingexternal factors of the organisation that affect the level of demand and supply of its workforce in the future.e.g. supply of labour, unemployment rate, migration, competition levels

5.2 Recruitment/Hiring

The process of developing a group of candidates who are interested and qualified for

a position offered by an organisation

Internal

External

5.2.1 Internal Recruitment

promoting or moving existing employees into a vacant position.

Advantages:• able to boost the commitment, morale and motivation of the

employees• reduce time and costs of employee development• increase the probability of the employee performing

successfully

closed recruitment systems - made informally and in a subjective condition.open recruitment system - vacant position is announced to all the employees.

5.2.2 External Recruitment

a process of developing candidates from outside the organisation.

Methods include job advertising, employee referral, walk-in, government and private employment agencies, career seminars and websites.

Choice of methods normally depends on types of vacant positions and the urgency of getting new employees.

5.3 Selection

The process of gathering information for evaluation and then selecting the best candidate for that particular position

Forms & Resume

References & background

TestsInterviews

5.3.1 Application forms & resume

Both contain the same information about the candidate such as personal information, academic background, working experience

application forms prepared by the organisation itself

resume is prepared by the candidate

5.3.2 References & Background Checking

job references such as former employer or colleagues, teacher or lecturers

to obtain validity and accuracy of the information provided

double check any particular information, negative matters or job-related background

conducted with learning centres, former employers, court records, police records and government agencies

5.3.3 Selection Testsmeasure either directly or indirectly whether a particular candidate is able to perform the job well

Specific Ability Test= aptitude testMeasures ability needed to do the job

Cognitive Abilitymeasure perceptual speed, verbal comprehension, numerical aptitude, general reasoning and spatial aptitude

Biographical DataOr biodata is an extensive study on the personal background and experiences to forecast future behaviour

Personality Test: measures the personality of the candidate towards the job. This test shows the candidates personality dimensions

Methods used to test include in-basket training, role playing, small group presentation and leaderless group discussion

5.3.4 Interviewsa method where company representatives will ask the candidate a series of questions related to the job

Unstructured Interviewask any questions to the candidate

Structured Interviewask a standard set of questions which had been earlier prepared and drafted.Include situation based, background-related, behaviour-related, job-related question

5.4 Development of Qualified Employees

Orientation

Training

Reward & Promotion

PerformanceEvaluation

5.4.1 Orientation

the process of introducing new employees to the programmes, policies and culture of the organisation

provide guidelines to succeed with the organisation

to ensure that new employees have the basic knowledge and skills needed

5.4.2 Training

provides opportunity for employees to develop working skills, experience and knowledge they need in order to perform their job or upgrading their job performance

Both new and existing employees

Not only lower-level employees but also by middle and higher level management

5.4.3 Determining needs for Training

Training can be costly, so conduct when really need it.

Determining the needs is a process of identifying and giving priority to the learning needs of the employees.

Can be known via identifying performance ineffectiveness, listening to complaints from customers, making observations on employees and managers, or assessing the skills and knowledge of employees.

The selection of candidates for training must be based on information related to a particular job area

5.4.3 Determining needs for Training

5.4.4 Training Methods

On the JobTrainees will be shown how to perform a job.An example is the job rotation.Must be supervised.

Off the Jobdone out of the location of the job area.Allows the demonstrator to focus on a particular education subject without any interference and in a controlled environment.

Apprenticerequires an apprentice to work for a certain period before he is allowed to perform a job or specialisation .Normally supervised by mentor

VestibuleTrainees are taught how to perform a job and use the relevant equipment by an experienced employee in a particular area.trainers can emphasise on theories and use the necessary techniques.

5.5 Performance EvaluationA process of evaluating job performance and preparing

feedback based on that evaluation

To inform the employee about their

performance

help in personnel development and

future training

RelevanceMeasures the performance related to the assigned job.

Validmethod used must be consistent regardless of time or who the evaluator.

5.5 Performance Evaluation

Individual Job Output

quantity produced, defaults made and cost per unit

BehaviourWhen it is difficult to specifically identify the output .e.g. accuracy and frequency of report submission, or average number of calls or meetings with customers

Common Criteria used:

Attitudea weak set of criteria.e.g. having good manners, exhibiting confidence, able to be independent or cooperative, trying to look busy or having a broad experience.

5.5.1 Who should Evaluate?

SupervisorAn employee is evaluated by the person who supervises him

Colleaguesa reliable approach.could augment the effectiveness of evaluation made by supervisors.May be biased.

Subordinatescan provide important and detailed information regarding the behaviour of their superiors. BUT, may be afraid.

360 degreesProvides feedback on performance from all parties related to the job of the employee being evaluated which covers general workers, customers, colleagues and managers

5.5.1 Methods of Performance Evaluation

Essay Writingrequires the employee being evaluated to explain about the strengths, weaknesses, earlier performances, potential and suggestions in increasing performance

Critical Incidentobserves the behaviour that acts as the key in differentiating between a good or bad work performance.

Measurement of Objective Performance

Objective performances that are frequently used are outputs, scraps, wastes, sales, customer complaints or level of default

Employee Comparisonthe evaluators rank employees according to such factors as performance and value to the organisation

5.6 Retaining Qualified EmployeesA process of keeping talented employees for as long as

possible.

Payment Levelwhether at a level below, above or at the same rate with the payment of salary in the labour market

Payment StructureIt is the internal payment distribution.Individuals at the top level will receive a higher pay compared to those at lower levels

Variable Paymentrelating payment with organisation performance to increase motivation, effort and job performance.e.g., iecework, sales commissions, profit-sharing and employee share ownership

Employment BenefitsThese are non-monetary rewards.e.g., retirement and pension plans, paid leave, sick leave, health insurance, life insurance, health treatment, discounts on products.

5.7 Employee SeparationThis is the loss of an employee by an organisation either

voluntarily or involuntarily

Involuntary separation arises when an organisation decides to

discontinue the service of an employee or retrench an employee.

Voluntary separation means that the employee decides to leave or retire

5.7.1 Employee Terminationa simple act but may hurt the feelings of employees

Employees should be first given a chance to change.a series of specific warnings, time to correct, consultation, show-cause letter, warning letter, suspension without payment.

Employees should be terminated based on sensible and rational reasons. To avoid court action, thus should be job-related reasons.

the reaction of other employees when one of them is terminated.affect the performance and motivation of existing employees.

5.7.2 Downsizingthe act of organised repealing of positions and jobs in the organisation. caused by the reduction of cost, decline in market shares or being too aggressive in employing workers and growth

Theoretically, downsizing should bring an increase in productivity and better performance profit and increase organisational flexibility.

When the financial condition and strategies implemented are not effective and downsizing is necessary.

Should also provide counselling to ease the feelings of the downsized employees and lift their motivation.

5.7.3 RetirementEmployees separate from organisation when their retirement period arrives. Can also be early retirement.

To reduce workforce, organisations offer financial benefits for employees in order to encourage them to retire early

The organisation may lose talented employees and face a large number of employees who want to retire early

5.7.4 Employee TurnoverAn employee voluntarily ends his service with an organisation. High level or turnover is not good.

Functional Turnoveran employee with a bad performance level chooses to resign voluntarily. Good as poor worker can be replaced with a better one.

Dysfunctional Turnovera high-performance employee chooses to leave voluntarily.Not good because when many high-performance employees leave a company, productivity is affected and costly to hire new employees plus the training cost.